Tax Law

Tax is the fee levied on a particular product or the income and activity of any individual. When the tax is charged directly on professional income, it is known as direct tax. On the other hand government when tax is levied on the value of a good, product or services it is known as indirect tax. A tax is a non-voluntary payment, but an imposed contribution, exacted pursuant to the governmental authority. Taxes consist of direct tax or indirect tax. They can be paid in money or like its labor. In the modern taxation systems, they are generally charged in money, but in-kind taxation is characteristic of traditional or as it is known as pre-capitalist states and their functional correspondents.

Taxation primarily helps in financing government expenditure. Almost in all the countries earnings of every individual as well as the enterprises are subjected to payment of income taxes. For instance, in U.S. maximum portion of the Federal Government’s revenues come from these income taxes. Funds provided by the tax duties have been used by states and their functional correspondents to carry out many functions. Basically these tax amounts are used by government bodies to promote civic welfare and finance public services such as street cleaning, construction of public toilet and street cleaning. Governments also make use of taxes to fund wellbeing and public services like education systems, health care systems, and pensions for the elderly, unemployment benefits, and public transportation. They also use different kinds of taxes and vary the tax rates so as to distribute the burden of tax among individuals. Also, taxes are applied to aid foreign and military funds, to manipulate the macroeconomic presentation of the economy (the government’s policy for doing this is known as its fiscal policy), or to amend patterns of utilization or service within an economy.

Some economists, particularly neo-classical economist’s, point of view suggest that taxation creates market deformation and results in economic inefficiency. Thus, they have sought to identify the class of tax system which would minimize this deformation. Since governments also sort out commercial disagreement, particularly in countries with common law, related urgings are at times used to validate a sales tax or value added tax. Taxation generally has four major purposes: Revenue, Redistribution, Reprising, and Representation.

The main purpose is revenue where taxes raise funds to expend on transportation, schools and hospitals, and on more indirect legislative functions like legal systems or market regulation. This is the most widely recognized function. The second is redistribution. Usually, this means moving of wealth from the richer sections of society to poorer sections. Reprising is the third purpose of taxation. Taxes are charged to address externalities: for example, tobacco is taxed, to discourage smoking. Many people advocate policies such as implementing a carbon tax. And the fourth, resulting effect of taxation has been representation. Several studies have shown that direct taxation like income taxes generates the greatest degree of legal responsibility and enhanced governance, whereas indirect taxation is inclined to have smaller effects. Tax laws vary from one country to another and are quite complex in certain countries and the burden falls differently in each country and sub-national unit.